What should I do? Merger of ETE and ETP

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Joined: Mon Jul 16, 2018 10:45 pm

What should I do? Merger of ETE and ETP

Post by Maelstrom » Thu Aug 02, 2018 5:52 pm

Ok, here's a short synopsis of my current predicament.

I'm 35, dual income family with 1 child, make ~175k a year and I max my work 401k(14% total contribution per year).
22-25% federal + 6% state
No debt except mortgage(250k remaining@3.625%)

I recently(3 weeks ago) came into 200k and I decided to put it to work in tax advantaged funds.
A re-balanced my 401k(100K into 100 Fidelity mid/large growth)
Then I bought 100k in a high yield munibond fund(5.5%)
My final middle tier purchase was 100k in ETP which is a MLP paying 11% dividends.

I purchased ETP 6 days ago at a strike price of 20.10 after reading a Seeking Alpha article on how it was a good turn around story with a potential corporate merger/simplification on the horizon in 9-18 months that might derive some extra value due to the merger netting you extra shares of the parent company ETE.

Fast forward 6 days and they announce the merger at a 1.28 unit ratio 1.28 ETE to 1 ETP. The share prices of ETP have correspondingly risen 20% since I bought it and I expect that there's more in the near future with a 2.75% dividend payout being recorded Monday. Now I'm not sure what I should do. Do I try to wait for a peak and sell then pay the ~28-31% in income taxes on the money or do I ride this long and hope that the simplified corporate structure pays off and that the new unified company begins to goose the dividend at a rapid pace(it pays 6.7% currently).

Also some other observations I've made today, with the fixed 1.28 share ratio, both stocks should be moving in lock step now that ETP has equalized but there's the possibility that might not hold up and if it crosses the 1.28 ratio would that be a trigger to get out? Another quirk, they pay 6.7 and 11.1 percent dividends, what happens monday when the prices are adjusted? The parent would lose less value but ETP is worth a fixed 1.28 so could it float back up immediately?

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